Floyd Industries stock has a beta of 1.69. The company just paid a dividend of $0.85, and the dividends are expected to grow at 7 percent. The expected return of the market is 16 percent, and Treasury bills are yielding 7 percent. The most recent stock price for Floyd is $57.
1. Calculate the cost of equity using the DDM method.
2. Calculate the cost of equity using the SML method.